VTB share price increase triggered by strong valuation

Following a strong valuation of its share price, Russia’s second largest lender, VTB, enjoyed a 5.4 per cent increase in its share price on Tuesday 18 August.

The increase in price, to 0.043 roubles per share, came after reports from Reuters that its shares had been independently valued at 0.048 roubles per share. This represented a premium of almost 20 per cent on the market value ahead of a share issue.

Traders and analysts claim the government is likely to buy most of the issue as the majority of investors will still be unwilling to pay the premium for the shares. Indeed the government has already put aside 180 billion roubles to invest in VTB capital.

A report by UniCredit Security says, ‘we believe that the government will purchase almost the whole issue since the goal is to recapitalise a bank suffering from mounting bad loans and not to attract new minority shareholders.’

In the first quarter of 2009 VTB reported a 20 billion rouble loss, which was partly attributed to rising bad loan provisions.